U.S. import prices fall below expectations in May on decline in imported petroleum prices

The U.S. import prices dropped below consensus expectations in May on a month-on-month basis. The prices fell 0.3 percent sequentially, as compared with expectations of a decline of 0.1 percent. A large fall of 3.9 percent in imported petroleum prices mainly drove the decline in the headline figure. Stripping the effect of imported petroleum prices, the headline measure was still muted. Food category was the only bright spot in the report, recording a rise of 1.2 percent sequentially and 4.1 percent year-on-year.

Industrial supplies dropped 1.8 percent sequentially, losing some of the solid momentum at the beginning of the first quarter. Elsewhere, capital goods, consumer goods and autos prices remained widely flat on the month, in line with soft import prices pressures for core consumer goods prices. Imported prices from the main trading partners were also muffled, declining 0.6 percent with Canada and staying flat on the month with China.

The latest import price report and downward revisions to earlier months led total import prices to rise 2.1 percent year-on-year, down from April’s print of 3.6 percent. This led import prices excluding fuels to rise 0.8 percent as compared with 1 percent gain seen in April.

Most of the monthly decline in prices in May was due to two major categories, namely industrial supplies and petroleum; however, import price pressures are not able to strengthen elsewhere too. Prices of imported consumer goods and autos continue to be soft at -0.2 percent year-on-year and 0.1 percent year-on-year, respectively.

“After having largely recovered from the deflationary trend in much of 2015 and 2016, these measures suggest imported pressures are likely to be largely neutral to core goods CPI in the coming months”, said Barclays in a research report.